HowardGold

We haven’t seen another stock market crash or a new Great Depression. The euro hasn’t imploded. Gold hasn’t gone near $5,000 an ounce. And true hyperinflation is nowhere to be found except in some pundits’ fevered imaginations.

But in reading users’ comments, I was struck by how many people insisted the worst was still to come and how few of them (exactly none, by my count) mentioned how they invest and how they’ve done.

Maybe they’re too embarrassed to say. If you’ve kept your money in the mattress for the past five years or you’ve loaded up on gold and silver coins, you’ve badly trailed the buy-and-hold “chumps” who weren’t smart enough to dump stocks when the sky was falling.

So, I wondered, why do people cling to discredited beliefs and act against their own self-interest?

Part of the answer lies in regret avoidance, a key concept in behavioral finance. Rather than admit their mistakes and suffer regret, people claim they will ultimately be vindicated.

But, as the comments plainly show, people’s political beliefs play a big role. Here’s a good example, from the comments:

“Every fiat currency in the history of man has collapsed — the dollar is no exception and once countries start trying to print their way out of debt you know you are nearing the end. … Gold, on the other hand, has been considered money for over 5,000 years.”

And here’s another:

“What people who have been riding the coattails of central bank money printing don’t understand is that … money printing works as a stimulus for a while then act[s] like a reverse stimulus as the loss of real wealth follows.”

Before you start trashing the messenger (me), I have real concerns about the Federal Reserve’s massive quantitative-easing program, in which the central bank has bought nearly $3 trillion worth of Treasury bonds and mortgage-backed securities since 2008. It has manifestly failed to stimulate economic growth, and the huge increase in bank reserves puts the Fed in uncharted waters.

“Never in history has a country that financed big budget deficits with large amounts of central-bank money avoided inflation. … Today, with more than $2.5 trillion of idle reserves on bank balance sheets, there is enormous fuel for greater inflation once lending and money growth rises. … Inflation is in our future.”

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